School's Out: Making Graduate School Unaffordable

By Steven Jacobson
Steven Jacobson is a senior at the University of Pennsylvania studying business and history.

Graduate students are anything but a core Republican constituency. Graduate degree holders backed Hillary Clinton, the Democratic nominee, by a 21-point margin in last November’s election. [1] Nearly a calendar year after Ms. Clinton’s surprising loss to President Donald Trump, the president’s party is looking to deal another blow to graduate students. The Republicans’ proposed tax bill, which was introduced in the House of Representatives last week, scraps a key clause that makes graduate tuition more affordable. The new bill could sink many graduate students deeper into debt, or perhaps deter them from pursuing an advanced degree at all.
 
At issue is Section 117(d) of the tax code, which frees students from being taxed on any reductions they may receive from their institution in tuition. [2] Many students, particularly those in the STEM fields, rely on such reductions to make their graduate degrees affordable. In exchange for serving as teaching or research assistants for the university, many graduate students receive waivers that wipe out some or all of the sticker price for their degree. According to the American Council on Education, 145,000 graduate students receive such a discount, which amounts to about $15,000 on average. [3] This covers the nearly $18,000 that the average graduate student pays in tuition. [4] Under the current tax code, they need not worry about counting it as taxable income.

In the new Republican tax bill, however, that exemption would go away, as students would now have to count the tuition reductions as income. Graduate research assistants make an average stipend of $30,000, according to Glassdoor, which would warrant just over $2,000 in income taxes.[5] Should they have to count their $15,000 tuition waiver as income, their taxes would come out to over $4,000. [6] For students with even bigger tuition waivers, these taxes would be even higher. An average graduate degree from an Ivy League university costs over $40,000 a year [7], so a student receiving a full waiver would see their taxes climb to over $10,000. [8]
 
Graduate students may not have to panic yet. The bill is still a long way from passing both houses of congress. Additionally, students at some schools may not be affected. Cornell University, for examples, distributes its tuition reductions as scholarships, which are also excluded from taxation and would be left that way by the new plan. [9] If Republicans did eliminate 117(d), it seems unlikely that a flood of dropouts would ensue, as a 2014 study by researchers at the University of Missouri, University of Florida, and Purdue University found that increases in student debt did not affect retention rates for PhD programs.
 
Still, a dramatic increase in the cost of a graduate degree could dissuade potential students from ever attending. This could, in fact, be a welcome change, as many have argued that a PhD can be a waste of time. The PhD job market has grown more competitive, as the proportion of graduate students with a job lined up after graduation has dropped across all fields in the last decade. [10] This change, however, threatens to make wealth, rather than aptitude, the gatekeeper for obtaining a graduate degree.